• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content
Introduction to Financial Management
 
  • 11,304 views

The Financial Accounting slideshare from WE School introduces the subject as not just a science – in the way the data is recorded) but an art too – in the way it is interpreted. Accounting is an ...

The Financial Accounting slideshare from WE School introduces the subject as not just a science – in the way the data is recorded) but an art too – in the way it is interpreted. Accounting is an information system which measures, processes and communicates financial information to decision makers.
To know more about Welingkar School’s Distance Learning Program and courses offered, visit:
http://www.welingkaronline.org/distance-learning/online-mba.html
This Slideshare is the sole Property of the Welingkar School of Distance Learning – Reproduction of this material , without prior consent, either wholly or partially will be treated as a violation of copyright.

Statistics

Views

Total Views
11,304
Views on SlideShare
11,293
Embed Views
11

Actions

Likes
14
Downloads
0
Comments
3

3 Embeds 11

https://twitter.com 8
http://www.brooomsticks.net 2
http://localhost 1

Accessibility

Categories

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel

13 of 3 previous next Post a comment

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    Introduction to Financial Management Introduction to Financial Management Presentation Transcript

    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTLearning Objectives ♠ familiarize financial objectives & Goals of a firm ♠ develop conceptual frame work of financial management. ♠ focus on nature, scope, and functions of financial management. ♠ discuss the role of finance manager in changing economic scenario.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTA . BackdropRole of Finance Manager 40 years ago ♠ maintain financial records ♠ prepare reports on company’s status and performance. ♠ arrange funds needed by the firm to meet its obligations on time.His services were required only when need for funds arose.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTA . BackdropRole of Finance Manager now - With technological advances in industries, increased business complexities, tightening money market, despondent state of stock market, his position has transcended the traditional role of garnering funds for the business.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTA . BackdropRole of Finance Manager now – contd. ♠ actively participates in all management decisions. ♠ deals with total funds employed. ♠ ensures funds are wisely applied among various projects. ♠ evaluates results of each such application.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTA . BackdropRole of Finance Manager now – contd. In this role , he is now directly concerned with decisions related to production, marketing and other activities that involve commitment of funds to the new or ongoing uses.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTA . BackdropRole of Finance Manager now – contd. To meet global competition from multinational companies, Indian firms are forming new business strategy to work on quality, reduce cost, improve productivity, and maximize corporate value. Financial manager plays a very effective and integrated role in financial decisions to implement this strategy.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTB . Financial Objectives of a Firm Corporate objectives are expressed in the mission and vision statements of companies. These are written in qualitative terms and are more ethical and philosophical in character and reflect top management’s values. Being profit seeking organization the management is supposed to set profit maximization as its basic objective .
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTB . Financial Objectives of a Firm B.1. Profit maximization objectiveThe objective is stated in terms of profits return on investment or profit-to-sales ratio. This objective is simple, employs resources where returns are highest, and permits quick judgment on effectiveness of financial decisions.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTB . Financial Objectives of a Firm B.1. Profit maximization objectiveThe objective has certain drawbacks –▼ (a) it is vague – what is profit? – total surplus before tax or after tax? Rate of return on sales? or capital employed? Owners’ funds? Profits on a short term basis or long term? Each interpretation has its distinct impact on financial decisions.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTB . Financial Objectives of a Firm B.1. Profit maximization objectiveThe objective has certain drawbacks –▼ (b) it ignores Time Value Factor Hence a project returning Rs. 90,000/- in year and alternative yielding Rs. 15,000/- a year for the next six years look equally attractive!
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTB . Financial Objectives of a Firm B.1. Profit maximization objectiveThe objective has certain drawbacks –▼ (c) it ignores Risk Factor Two projects can have equal profitability but different risk profiles. Risk evaluation is absent in statement of the profit maximization objective.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTB . Financial Objectives of a Firm B.2. Wealth maximization objective This objective is clear & it suggests that for a project to be undertaken , its net present value (gross present value minus capital investment) must be positive. While calculating gross present value stream of earnings expected in future are discounted at a rate that reflects their uncertainty.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTB . Financial Objectives of a Firm B.2. Wealth maximization objectiveNet present worth is arrived using formula A1 A2 AnW = + + . . . - C (1+K) (1+K)2 (1+K)n Where W is net present worth, A1 A2 An expected stream of benefits expected to occur over years, K is discount rate that reflects degree of risk & timing, & C initial capital outlay for the project.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTB . Financial Objectives of a Firm B.2. Wealth maximization objective This objective is very clear and considers time value of money as well as risk & uncertainty element ; and hence superior to profit maximization objective. In short run if magnitude of risk is not great , wealth maximization & profit maximization objectives show no difference.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTB . Financial Objectives of a Firm B.3. Maximization of Profit Pool A profit pool is defined as the total profits earned in an industry at all points along the industry’s value chain. It includes the disaggregate of processes, the mapping of the value chain beyond the confines of legal entities, the adoption of flexible organizational structures and creation of net worked organizations.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTB . Financial Objectives of a Firm B.3. Maximization of Profit Pool A profit pool concept looks beyond the core business and spots activities with untapped source of profit. Low margins on core business are used to attract customers and high margin ancillary business is transacted with them to maximize profit pool.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTB . Financial Objectives of a Firm B.3. Maximization of Profit Pool Increased sales revenue and market share do not necessarily provide profit pool. A profit pool map alone answers the question how and where is the money made in the industry.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTB . Financial Objectives of a Firm B.3. Maximization of Profit PoolIn automobile industry profit is made from making & selling cars selling used cars petrol retail sales insurance after sales service car leasing & finance Revenue from core activity is more but major profit is earned from ancillary activities .
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTC . Financial Goals of a Firm Maximize short term and long term profits & minimize risks by striking a balance between risk & return. Ensure effective utilization of resources. Build sufficient flexibility in financial operations Impart liquidity and profitability of the enterprise. Goals need to be defined for achievement of the objective of wealth maximization.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTD . Management vs. Owners The goal of maximizing owners’ interest predominates other goals of the firm so that management is allowed to continue. In this role the management acts as a satisfier for owner rather than as a maximizer for the firm. Towards this end management may accept lower margins to ensure sustained market share, rather than aggressively exploit market potential.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTE . Social Objective As a corporate citizen, modern firm has another objective – to assume social responsibility. This acknowledges environment conducive to economic growth provided to the firm by the society. Some argue that social responsibility requires firm to bear more costs and risks and is , therefore, in conflict with its economic goals.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTE . Social Objective Experience, however, has proved that in the long term both economic and social objectives are mutually beneficial. Thus funds deployed to improve social environment of workforce – housing, schools, hospitals etc. – increase costs immediately. But gains from improved productivity & reduced turnover, effectively more than offset them in the long run.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTF . Concept of Financial Management Interpretations of the term ‘Finance’F1 Acquiring funds on reasonable terms to pay bills and other obligations promptly. This is traditional & restrictive view.F2 Finance means cash, and finance manager must go in details in all activities in production, marketing, personnel research that involve cash. This is very broad and vague viewpoint.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTF . Concept of Financial ManagementInterpretations of the term ‘Finance’- contd.F3 Procurement of funds and their wise application is the modern approach to finance. The finance manager has to obtain funds on most economic terms and apply them to projects that generate maximum wealth. This is depicted on the diagram now ..
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTF . Concept of Financial Management Interpretations of the term ‘Finance’- Modern Approach Funds Source Funds Application Internal cash flows Asset Expenditure from operations a) Current External debt or b) Fixed equity from Non-asset Expd. Individuals a) Labour / Material Institutions b) Interest Charges Other firms c) Profit distribution Government to owners
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTG . Nature of Financial ManagementFinancial management is an integral partof overall management as the functioninvolves, in addition to fund raising ,utilization of funds and monitoring theiruse. Funds are used for production,marketing, human resource, research andall other business activities and hencefinancial manager has to fully associatewith all business activities.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTG . Nature of Financial ManagementSuccess of strategic business decisionslike entry in new territory, productline, expansion of capacity, relocation,depends upon their financial appraisals.As a part of this appraisal, financemanager has to continuously reviewfinancial decisions providing dynamicperspective to financial management.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTG . Nature of Financial Management Various financial functions are intimately connected with each other. Proportion of fixed assets to current assets decides risk complexion, which in turn influences the terms at which fresh funds can be raised and methods to be adopted to finance projects. Dividend decisions affect financing decisions which are again influenced by investment decisions.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTG . Nature of Financial Management In other words, except for management of income which is his prime responsibility, finance manager has to operate with expertise of other functional heads of the organization to discharge his responsibilities effectively.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTH . Functions of Financial Management H.1. Traditional Concept of Finance Function Determining funds requirements, finding most economic source for them and timing of acquiring and disposing funds was considered as the real scope of financial management. Allocation of funds for different assets, monitoring them to optimize their use, was considered to be in the scope of non- financial executives.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTH . Functions of Financial Management H.1. Traditional Concept of Finance Function This view is criticized by modern scholars on following grounds, ► Just like finance manager is responsible to acquire funds, he is also responsible to ensure their proper utilization over the best alternatives available. Traditional concept ignores the second responsibility.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTH . Functions of Financial Management H.1. Traditional Concept of Finance Function ► The old concept focuses on one time jobs of finance manager like incorporation, consolidation, recapitalization etc and ignores his responsibility in resolving day to day ongoing financial problems.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTH . Functions of Financial Management H.1. Traditional Concept of Finance Function ► The old concept focuses on corporate finance and ignores his responsible role in management of non incorporated firms, partnerships, trading concerns, etc. ► The old approach considers long term finance important and ignores finance managers’ skills required to tackle day to day working capital funding.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTH . Functions of Financial Management H.2. Modern Concept of Finance Function ► It is an integral part of overall management & not only an advisory function. ► In addition to procurement of funds at optimum cost, it has to ensure beneficial application of funds for business growth. ► It includes planning, raising, allocating & controlling finances to accomplish broad business objectives.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTH . Functions of Financial Management H.3. Contents of Modern Finance Function Are categorized by modern scholars as a] Recurring functions b] Non-recurring, one time or episodic functions.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTH . Functions of Financial Management H.3. Contents of Modern Finance Function a] Recurring functions: Recurring Finance Functions 1 2 5Planning for Raising Allocation Monitoring Funds Funds of of uses of 3 4 Funds Income
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTH . Functions of Financial Management H.3. Contents of Modern Finance Function1. Planning for funds : 1. Develop long term financial plan to determine quantum of funds requirements, its duration and make up of investments. 2. Synchronize cash inflows with outflows. 3. Balance profitability with risk by deploying all funds and keeping least funds liquid to meet emergencies.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTH . Functions of Financial Management H.3. Contents of Modern Finance Function1. Planning for funds : 4. “ Capitalization” – reflects decisions regarding fund requirements. 5. “Capital Structure” – reflects decisions regarding forms of financing requirements. 6. Prepare & use ‘Master Plan’ , ‘Funds Flow Statement’, ‘Forecast of Working Capital’, ‘Cash Budget’ etc.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTH . Functions of Financial Management H.3. Contents of Modern Finance Function2. Raising of funds :☻ If funds are to be raised through equity capital, finance has to arrange for prospectus, appoint agents to handle capital issue, ensure it is underwritten, and monitor the process until shares are issued to subscribers.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTH . Functions of Financial Management H.3. Contents of Modern Finance Function2. Raising of funds : contd.☻ If funds are to be raised through borrowings from banks or financial institutions, finance manager has to prepare a project report, enter into agreement, schedule the repayments. More expertise from him is expected when funds are borrowed from overseas.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTH . Functions of Financial Management H.3. Contents of Modern Finance Function3. Allocation of funds : While allocating funds over different assets, factors to be considered by the Finance Manager are competing uses, immediate requirements, management of assets, profit prospects & overall management plans.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTH . Functions of Financial Management H.3. Contents of Modern Finance Function3. Allocation of funds :contd. Next management of sundry debtors and inventories is prime responsibility of finance manager. Sundry debtors are to be maintained at minimum without adverse effects on sales. Optimum levels of inventories are to be maintained to ensure least funds are blocked but materials are available when needed.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTH . Functions of Financial Management H.3. Contents of Modern Finance Function4. Allocation of income : Finance Manager has to decide how much of the income is to be retained within the business for financing investments or retiring debts & how much to be distributed to owners.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTH . Functions of Financial Management H.3. Contents of Modern Finance Function5. Monitoring uses of funds : Long term use for capital investment is monitored by comparing, on a regular basis, actual results with those estimated in the project report used for approval of release of funds. Comparisons enable corrective action and revisions to balance expenditure.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTH . Functions of Financial Management H.3. Contents of Modern Finance Function5. Monitoring uses of funds : contd. Short term use for receivables is monitored by reviewing credit and collection policies, their strict implementation, keeping tab on collection days, controlling ratio of bad debts to sales etc.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTH . Functions of Financial Management H.3. Contents of Modern Finance Function5. Monitoring uses of funds : contd. Short term use for inventories is monitored by reviewing inventory norms, implementing them , checking slow moving and non moving items in stock, keeping inventory turnover ratio high without causing interruptions in production due to lack of materials.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTH . Functions of Financial Management H.3. Contents of Modern Finance Function5. Monitoring uses of funds : contd. Finance Manager needs to obtain information, record it, store and process, analyze and make use of it. This data allows him to prepare reports to Management for action.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTH . Functions of Financial Management H.3. Contents of Modern Finance Functionb] Non-recurring functions. Are infrequent and usually at the time of start up of the company, or during a major liquidity crisis when the capital has to be re-structured. Finance manager has to handle financial aspects of mergers & acquisitions.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTI . Scope of Financial Management Is very wide; starts from inception of the company to its growth, expansion & eventual winding up. Mainly covers decision areas related to investment; financing & dividends.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTI . Scope of Financial ManagementDecision areas related to investment : Long term investment decisions relate to allocation of funds to projects whose benefits accrue over a long period. For internal investment decisions, economic viability of different projects is studied to select most profitable alternative.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTI . Scope of Financial ManagementDecision areas related to investment : For external investment decisions firm considers investing in other company and arranging merger or acquisition. Or else it considers portfolio management by selecting a bundle of securities that provide maximum yield at minimum risk.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTI . Scope of Financial ManagementDecision areas related to investment : For short term investment decisions finance manager decides how the funds are distributed over cash or cash equivalents, receivables and inventories. Here main issue is trade off between profitability & liquidity.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTI . Scope of Financial ManagementDecision areas related to financing : Optimal financing mix or make up of capitalization is determined by :Sources of fundsQuantum of fundsCost of funds used today.Cost of future funds.How much quantity from each source?Which instruments to use and when?Is service of a financial institute to be used?Are underwriting services to be used?
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTI . Scope of Financial ManagementDecision areas related to dividends :Both goals of growth & dividends are desired, these goals are conflicting as higher dividends mean lesser retained earnings required for growth.Finance manager balances funds over these purposes in such a way that wealth is created for stockholders over a period of time.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTJ . Cardinal Principles of Financial ManagementJ .1. Strategic Principle :◘ All financial decisions be integrated with overall corporate objectives and strategies. It requires finance manager to consider external economic forces reflected in fiscal & industrial policies of the Government.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTJ . Cardinal Principles of Financial ManagementJ .2. Optimization Principle :◘ Maximum utilization of funds should be the goal of financial management. This mandates proper balance between fixed and working capital. Shortfall in one category must never be met by employing surplus of the other.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTJ . Cardinal Principles of Financial ManagementJ .3. Risk – Return Principle :◘ Maintain proper balance between risk and return. Firm flush with cash has no risk, but has no income from cash lying idle. If all funds are employed in income earning assets, paucity of working capital may lead to financial crisis. Hence need to maintain balance.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTJ . Cardinal Principles of Financial ManagementJ .4. Marginal Principle :◘ An enterprise should continue to work until its marginal income equals its marginal cost. While investing funds, a firm should invest in a project so long as marginal income from that project is more than marginal cost of funds required to finance it.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTJ . Cardinal Principles of Financial ManagementJ .4. Marginal Principle : contd. Projects A,B,C, etc in the next chart, are arranged in descending order of % returns from them. Marginal cost of funds is 18%. All projects with returns over 18% are suitable candidates for investment.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTJ . Cardinal Principles of Financial ManagementJ .4. Marginal Principle : contd.%3020 18% marginal cost10 A B C D E F G 0 50 150 250 350 Investment (cumulative) Rs. Lakhs
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTJ . Cardinal Principles of Financial ManagementJ .5. Suitability Principle : Source of fund selected to finance an asset should match with the character of the asset. Hence this principle dictates that short term financial needs be met with short term sources such as short term borrowings, overdrafts etc.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTJ . Cardinal Principles of Financial ManagementJ .5. Suitability Principle : contd. Long term assets like plant and machinery be financed from long term sources like equity, debentures, long term loans etc.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTJ . Cardinal Principles of Financial ManagementJ .6. Flexibility Principle : The financial plan needs to have a built-in flexibility to meet dynamic business environment. Several sources be there to provide alternatives and bargaining power. If all sources of funds are fully utilized, the financial plan becomes rigid.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTJ . Cardinal Principles of Financial ManagementJ .7. Timing Principle : This principle demands that finance manager should time his investment and financing decisions in such a way to seize all available market opportunities.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTJ . Cardinal Principles of Financial ManagementJ .8. Ploughing Back Principle : This principle states that firm must generate adequate internal cash surpluses to fund replacement, modernization and growth of its capacities. A strong internal resources position enables finance manager to obtain more funds from market at optimum terms.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTK . Concept of Financial Management in Public Sector Principles of prudent financial management adopted in the private sector are equally applicable to the public sector. Financial management in public sector has its additional characteristics related to broad objectives, multiple controls and very large size of operations.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTK . Concept of Financial Management in Public Sector The objectives of social gains regarding development of backward areas, or provision of employment, creating basic infra-structure by providing basic raw materials, machineries are in conflict with the normal financial objective of profit maximization. For survival & growth, it has to balance these diverse objectives with making profit for itself.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTK . Concept of Financial Management in Public Sector The task of financial management assumes greater significance as the amount of assets, cash & materials controlled by public sector firms is more the budgets of an entire big size state. This size defines the quality & depth of financial control that needs to be exercised in the public sector.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTK . Concept of Financial Management in Public Sector Financial management in the public sector has to pay greater attention to the outside economic environment governed by the economic, fiscal and industrial policies of the Government. The funds in this sector are sourced from three agencies – Government, Banking System & Internal Sources.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTK . Concept of Financial Management in Public Sector Finance manager in the public sector has to establish greater co-ordination with other departments for efficient use of the funds. Two way information system between the finance & other departments has to be developed for this purpose.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTK . Concept of Financial Management in Public Sector Even though profit generation is not the only goal for Finance manager in the public sector, he has to control inventories, increase sales and reduce costs to maintain overall margins. The Government and employees expect firms in the public sector to make profit so that they are not a liability to former and provides benefits like bonus to the latter.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTK . Concept of Financial Management in Public Sector Unlike in private sector, finance manager in public sector is controlled by top management of his own undertaking as well as authorities in various ministries. Multiple reporting is complex as objectives of internal management do not always match those of outside agencies.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTL . New Paradigms of Financial Management Both profit and non-profit firms work in a fiercely competitive environment where vigorous growth is essential for survival. This is achieved through product development & innovation and world class levels in product quality & cost as well as in network for distribution and marketing.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTL . New Paradigms of Financial Management One of the critical factors for failures of large firms, in both public & private sectors, is use of archaic outmoded tools for their financial management. These companies could not reap benefits of favorable economic environment. For progress & survival, all companies need to follow the new paradigms of financial management.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTL . New Paradigms of Financial ManagementNew paradigms☻ Financial management is integral part of strategic management.☻ Objectives of financial management must be tethered to corporate objectives.☻ Thrust of financial management on value addition of the organization, stockholders & stakeholders.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTL . New Paradigms of Financial ManagementNew paradigms☻ Maximize profit pool and not just profit & wealth.☻ Re-engineer finance processes, dig out hidden costs & eliminate.☻ Focus on core activities & source rest to suppliers.☻ Adopt zero working capital, just in time, web based accounting and inventory software.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTL . New Paradigms of Financial ManagementNew paradigms☻ Evolve new financial instruments like zero coupon bonds, deep discount bonds, floating rate bonds, convertible warrants etc to garner funds efficiently.☻ Hedge risks arising out of fluctuations in prices of commodities, shares; interest and foreign exchange rates.
    • NATURE AND SCOPE OF FINANCIAL MANAGEMENTL . New Paradigms of Financial ManagementNew paradigms ☻ In short everything possible to exploit waves of liberalization and globalization.Next “ Financial Statements & Financial Analysis”